Auditor: Kentucky’s special taxing districts ‘operating in the pitch black’

By Beth Musgrave
bmusgrave@herald-leader.com

FRANKFORT — The first-ever database and inventory of all special taxing districts in Kentucky should be completed by the end of this year, State Auditor Adam Edelen told a legislative committee on Wednesday.

Special districts can levy taxes and fees on citizens but are rarely overseen by an elected official. There is no central oversight of most special districts and no one watching to see how taxpayers dollars are spent, Edelen told the Interim Joint Committee on Local Government.

Some of Kentucky’s most prominent spending audits in recent years have involved special districts, including the Blue Grass Airport, the Fayette County Library and the Jefferson County and Louisville Metropolitan Sewer District. Other special districts include some fire departments, soil and water conservation districts and county health departments.

“They aren’t just operating in the dark, they are operating in the pitch black,” Edelen said.

Edelen’s office is collecting information from county fiscal courts and other government organizations on how many special districts there are in Kentucky. His office will collect those organization’s financial information and put it on its Web site so people can examine the finances of those special districts.

It is believed there are somewhere between 1,000 and 1,800 special districts in Kentucky that spend between $500 million and $1 billion of taxpayer money. Those districts are overseen by boards that are typically appointed by either a county judge-executive or a mayor.

Sen. Damon Thayer, R-Georgetown, has pushed for legislation in the past that would give a county fiscal court veto power over any potential tax increase levied by a special district. That legislation has repeatedly failed to gain traction as special district employees and board members actively opposed it, Thayer said.

The boards of those special districts are volunteers who do a great job, Thayer said, “but they are one step removed from the accountability of the voters.”

Edelen said the vast majority of special districts have nothing to fear from his efforts. Most have very efficient operations. However, the current system does not allow special districts to show that they are good stewards of taxpayer money, he said.

There are more than 43 different types of special districts and myriad statutes governing special districts in Kentucky. The Department of Revenue oversees nine different classes of special districts and all special districts are supposed to send financial information to the Department of Local Government. However, there are no penalties if districts do not provide the information.

“It’s not just a mess, it’s a scandal,” Edelen said of the current system of tracking local special districts.

Edelen said the auditor’s office may also release recommendations by the end of the year about how to improve oversight and accountability of special districts. One recommendation is to create a central registry for special districts, Edelen said.

Thayer said he hopes that Edelen’s efforts to better track the special districts will spur the legislature to create more oversight of the districts.

“This is a significant issue that we’re going to have to deal with as the number of special districts continues to grow,” Thayer said. “The dialogue in the country has changed … The taxpayers are now more focused on accountability.”

Filed Under: Adam Edelen • Damon Thayer • KY General Assembly • State Government